La. Admin. Code tit. 10 § XV-1702
A. The following terms shall have the meanings provided herein, unless the context clearly indicates otherwise.
Affiliate and/or Affiliated Company -
a. the term affiliate is defined as follows:
i. when used with respect to a specified person or legal entity, affiliate means a person or legal entity controlling, controlled by or under common control with, another person or legal entity, directly or indirectly through one or more intermediaries;
ii. when used with respect to a Louisiana entrepreneurial business, affiliate means a legal entity that directly, or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, a Louisiana entrepreneurial business;
Applicant- a Louisiana corporation organized under an incorporating statute which applies to the commissioner for certification as a LCDFI.
Application- a completed application as determined by the commissioner.
Associate of a LCDFI-
a. any of the following:
i. a person serving a LCDFI, or an entity that directly or indirectly controls a LCDFI, as any of the following: officer, director (including advisory, regional directors and directors emeritus), employee (provided such employee has significant management and policy responsibilities and powers, or is highly compensated in comparison with the other employees), agent, investment or other advisor, manager (in the case of a manager-managed limited liability company), managing member (in the case of a member-managed limited liability company), external accountant, or outside general/special counsel;
ii. a person directly or indirectly owning, controlling or holding with the power to vote 10 percent or more of the outstanding voting securities or other ownership interests of the LCDFI;
iii. a current or former spouse, parent, child, sibling, father-in-law, mother-in-law, brother-in-law, sister-in-law, son-in-law or daughter-in-law of any person described in §1702Associate of a LCDFI.a.i or ii;
iv. a person individually or collectively controlled by or under common control, directly or indirectly, with any person described in §1702Associate of a LCDFI.a.i, ii or iii;
v. a person that invests in the LCDFI and has received an income tax credit reduction under the LCDFI Act;
vi. an affiliate of any person described in §1702Associate of a LCDFI.a.v; or
vii.(a). a person that, within six months before or at any time after the date that a LCDFI invests in the person, is controlled by a LCDFI or any of its affiliates;
(b). however, even though a LCDFI may not intend to control a business in which it invests, it may obtain short-term (less than one year) control over the Louisiana entrepreneurial business after its initial investment if such control is acquired as a means of protecting the LCDFI's investment resulting from a material breach of any financing agreement. Such control will not create an associate relationship under §1702Associate of a LCDFI.a.vii.(a);
b. for the purposes of this definition, if any associate relationship described in §1702Associate of a LCDFI.a.i-vi exists between a person and the LCDFI at any time within six months before or at any time after the date that the LCDFI makes its initial investment in such person, that associate relationship is considered to exist on the date of the investment.
Business Plan- a written narrative providing a general description of the proposed Louisiana community development financial institution ("LCDFI") which should include, at a minimum, a description of the LCDFI's organizational structure; its location; the types of lending and financing it intends to offer and to whom; whether it intends to provide management assistance and if so, to what extent and to whom; and whether the LCDFI will operate as a profit or nonprofit corporation.
Capitalization - for purposes of initial certification, pursuant to R.S. 51:3086(B):
a.Generally Accepted Accounting Principles (GAAP) Capital - common stock, preferred stock, general partnership interests, limited partnership interests, surplus and any other equivalent ownership interest, all of which shall be exchanged for cash; undivided profits or loss which shall be reduced by a fully-funded loan loss reserve; contingency or other capital reserves and minority interests; less all organization costs;
b.LESS - the following, when any preferred or common stock, partnership interests, or other equivalent ownership interests are subject to redemption or repurchase by the LCDFI: preferred stock, common stock, partnership interests, limited partnership interests, and other equivalent ownership interests shall be multiplied by the following percentage reductions and deducted from capital.
Within 5 years from redemption or repurchase | 20 percent |
Within 4 years from redemption or repurchase | 40 percent |
Within 3 years from redemption or repurchase | 60 percent |
Within 2 years from redemption or repurchase | 80 percent |
Within 1 year from redemption or repurchase | 100 percent |
c. Notwithstanding the foregoing, there will be no reduction for a withdrawal of capital within five years after certification, provided the withdrawal is contemplated by all governing documents and disclosed to all prospective investors and any such withdrawal is concurrently replaced by an equal amount of cash GAAP capital. Moreover, the amount contemplated to be withdrawn shall not be the basis for any income tax credit reduction.
Change of Control- for purposes of R.S. 51:3087(F) shall mean:
a. a change in beneficial ownership of 50 percent or more of the outstanding voting shares of the LCDFI; or
b. individuals who constitute the voting power of the board of directors, board of managers or other governing board of the LCDFI as of the later of the LCDFI's certification date or the date of the LCDFI's last notification under R.S. 51:3087(F) cease to comprise more than 50 percent of the voting power of such board of directors, board of managers, or other board; or
c. a change in the general partner or manager of the LCDFI or a change of control with respect to such general partner or manager; or
d. any merger or consolidation if a change of control has occurred based upon the surviving entity being considered to be a continuation of the LCDFI that was the party to the merger or consolidation transaction.
Control -
a. solely for purposes of determining whether a Louisiana entrepreneurial business controls, is controlled by, or is under common control with another person, or if a person is an associate of a LCDFI, control means:
i. the power or authority, whether exercised directly or indirectly, to direct or cause the direction of management and/or policies of a legal entity by contract or otherwise; or
ii. to directly or indirectly own of record or beneficially hold with the power to vote, or hold proxies with discretionary authority to vote, 50 percent or more of the then outstanding voting securities issued by a legal entity, when such control is exercised with respect to a specified person or legal entity;
b. for all other purposes, control -
i. the power or authority, whether exercised directly or indirectly, to direct or cause the direction of management and/or policies of a legal entity by contract or otherwise; or
ii. to directly or indirectly own of record or beneficially hold with the power to vote, or hold proxies with discretionary authority to vote 25 percent or more of the then outstanding voting securities issued by a legal entity.
Date on Which an Investment Pool Transaction Closes - date that a LCDFI designates, and notifies the commissioner of such designated date, that it has received an investment of certified capital in an investment pool. For purposes of this definition, an investment pool transaction may not close prior to:
a. execution of all required documents and elimination of all material contingencies associated with the consummation of the transaction; and
b. the date that the LCDFI receives a cash investment of certified capital that is available for investment in Louisiana entrepreneurial businesses.
Employees -
a. full-time and part-time employees and officers, converted to a full-time equivalent basis;
b. the term employees shall not include:
i. attorneys, accountants or advisors providing consulting or professional services to a Louisiana entrepreneurial business on a contract basis; or
ii. employees of any business that perform services (contractor) for a Louisiana entrepreneurial business.
For example: a contractor may enter into an agreement to perform services for a Louisiana entrepreneurial business. The contractor's employees that perform services under that agreement would not be employees under this definition.
Equity Features - includes [pursuant to R.S. 51:3084(5)(b)] the following.
a.Royalty Right - rights to receive a percent of gross or net revenues, either fixed or variable, whether providing for a minimum or maximum dollar amount per year or in total, for an indefinite or fixed period of time, and may be based upon revenues in excess of a base amount.
b.Net Profit Interests - rights to receive a percent of operating or net profits, either fixed or variable, whether providing for a minimum or maximum dollar amount per year or in total, for an indefinite or fixed period of time, and may be based upon operating or net profits in excess of a base amount.
c.Warrants for Future Ownership - options on the stock of the Louisiana entrepreneurial business. The Louisiana entrepreneurial business may repurchase a warrant (a "call") or the Louisiana entrepreneurial business may be required to sell a warrant (a "put") at some stated amount or an amount based on a pre-agreed upon formula.
d.EquitySale Participation Right - conversion options of debt, to convert all or a portion of the debt to the corporate stock of the Louisiana entrepreneurial business, then to participate in the sale of the stock of the Louisiana entrepreneurial business.
e.Equity Rights - the receipt or creation of a significant equity interest in a Louisiana entrepreneurial business.
f. And such other conceptually similar rights and elements as the OFI may approve.
Financing Assistance Provided in Cash and the Investment of Cash - transaction, which in substance and in form, results in a disbursement of cash.
Examples of transactions excluded from this definition are: circular transactions as determined by the commissioner; capitalization of accrued principal, interest, royalty or other income; letters of credit; loan guarantees; prepaid debt; loan collection expenses or legal fees incurred by a LCDFI in protecting its collateral interest in an investment.
Institution Affiliated Party- a director, officer, employee, agent, controlling person, and other person participating in the affairs of the LCDFI.
Investment-
a. at all times, in order to perfect the tax credits earned as a result of an investment described in R.S. 51:3084(3) and (9), or R.S. 51:3085(A) and (B), the LCDFI shall have at least 50 percent of the certified capital of each investment pool that is received in cash:
i. available to be invested in qualified investments;
ii. invested in qualified investments made subsequent to the date on which the investment pool transaction closes; or
iii. a combination of §1702Investment.a.i and ii.
b. i. anInvestment furthers economic development within Louisiana if the proceeds from an investment are used in a manner consistent with representations contained in the affidavit required to be obtained from the Louisiana entrepreneurial business prior to an investment in the business and the documented use of such proceeds promote Louisiana economic development. Proceeds shall be determined to promote Louisiana economic development if more than 90 percent of the proceeds derived from the investment are used by the Louisiana entrepreneurial business for two or more of the following purposes:
(a). to hire significantly more Louisiana employees;
(b). to directly purchase or lease furniture, fixtures, land or equipment that will be used in the Louisiana operations of the business or to construct or expand production or operating facilities located in Louisiana. This does not include the purchase of these assets as part of a company buyout;
(c). to purchase inventory for resale from Louisiana-based operations or outlets;
(d). to capitalize a business in order for the business to secure future debt financing to support the Louisiana operations of the business. Such future debt financing must be obtained within three months of the qualified investment date;
(e). to increase or preserve working capital and/or cash flows for Louisiana operations of the business. However, except as allowed in Subclause (d) above, this does not include those investments whereby the proceeds of the investment will be utilized to refinance existing debt of the business;
(f). to preserve or expand Louisiana corporate headquarters operations. Preserve means a company that is in danger of failing or contemplating a move out-of-state;
(g). to support research and development or technological development within Louisiana;
(h). to fund start-up businesses that will operate primarily in Louisiana ; or
(i). to provide for an additional economic benefit not otherwise described above. However, before this purpose may be used as a basis for a determination that the investment furthers economic development within Louisiana, the LCDFI shall request in writing and the commissioner shall issue a written response to the LCDFI that, based upon relevant facts and circumstances, the proposed investment will further Louisiana economic purposes and result in a significant net benefit to the state. The commissioner's letter opinion shall be issued within 30 days of the request by the LCDFI, and shall be part of the annual review required to be performed by the office and billed according to provisions contained in §1710. A.1 However, upon written notification to the LCDFI, the 30-day review period can be extended by the commissioner if he determines that the initial information submitted is insufficient or incomplete for such determination;
ii. an investment by a LCDFI in an interim construction project shall not be considered to further economic development within Louisiana unless the same LCDFI also provides the permanent financing.
Net Income - net income as defined under or consistent with Generally Accepted Accounting Principles.
Net Worth - net worth as defined under or consistent with Generally Accepted Accounting Principles.
Office - the Louisiana Office of Financial Institutions (OFI).
Participation between LCDFIs - are loans or other investments in which one or more LCDFIs have an ownership interest. If a loan or investment is determined to meet the definition of a qualified investment, a LCDFI may only include its participation (ownership interest) as a qualified investment.
Permissible Investments- for purposes of R.S. 51:3087(G), cash deposited with a federally-insured financial institution; certificates of deposit in federally insured financial institutions; investment securities that are obligations of the United States, its agencies or instrumentalities, or obligations that are guaranteed fully as to principal and interest by the United States; investment-grade instruments (rated in the top four rating categories by a nationally recognized rating organization); obligations of any state, municipality or of any political subdivision thereof; money market mutual funds or mutual funds that only invest in permissible investments of a kind and maturity permitted by this definition; or any other investments approved in advance and in writing by the commissioner. All permissible investments which are included in the calculation under the definition of Investment in LAC 10:XV.1702 shall have a maturity of two years or less or the terms of the investment instrument shall provide that the principal is repayable to the LCDFI within 10 days following demand by the LCDFI in connection with funding a qualified investment.
Person- a natural person or legal entity qualified to seek certification as a LCDFI.
Sophisticated Investor - any of the following:
a. an institutional investor such as a bank, savings and loan association or other depository institution insured by the Federal Deposit Insurance Corporation, registered investment company or insurance company;
b. a corporation with total assets in excess of $5,000,000;
c. a natural person whose individual net worth, or joint net worth with that person's spouse at the time of his purchase, exceeds $1,000,000; or
d. a natural person with an individual taxable income in excess of $200,000 in each of two most recent years or joint income with that person's spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year.
Total Certified Capital under Management for purposes of investment limits, pursuant to R.S. 51:3087(G):
a.GAAP Capital- common stock, preferred stock, general partnership interests, limited partnership interests, surplus and other equivalent ownership interests, all of which shall be exchangeable for cash and which is available for investment in qualified investments ; undivided profits or losses which shall be reduced by a fully-funded loan loss reserve; contingency or other capital reserves and minority interests; reduced by all organization costs.
b.PLUS - Qualified Non-GAAP Capital : the portion of debentures, notes or any other quasi-equity/debt instruments with a maturity of not less than five years which is available for investment in qualified investments.
c.LESS-the following, when any GAAP Capital or Qualified Non-GAAP Capital is subject to redemption or repurchase by the LCDFI:
i. the GAAP Capital and Qualified Non-GAAP Capital subject to redemption or repurchase shall be multiplied by the following percentage reductions and deducted from capital:
Within 5 years from redemption or repurchase | 20 percent |
Within 4 years from redemption or repurchase | 40 percent |
Within 3 years from redemption or repurchase | 60 percent |
Within 2 years from redemption or repurchase | 80 percent |
Within 1 year from redemption or repurchase | 100 percent |
d. the portion of an investment that is guaranteed by the United States Small Business Administration or the United States Department of Agriculture's Business and Industry Guaranteed Loan Program shall be excluded from the amount of the investment when determining the investment limit pursuant to R.S. 51:3087(G).
La. Admin. Code tit. 10, § XV-1702